The Foreign Policy Centre

The European Thinktank with a Global Outlook

China has discovered its own economic consensus Joshua Cooper Ramo

Financial Times Op-Ed Friday May 8 2004

In 1990, John Williamson, a World Bank economist, exhausted from decades of Latin American debt workouts, penned a list of virtues for emerging economies. They should be open to capital flows, he argued, while moving towards transparency, privatisation and liberalisation. Elizabeth House Mezzanine Floor Mr Williamson's ideas were promptly shuffled into a doctrine - 39 York Road proscriptive and western-based - that became known as the London SE1 7NQ "". Mixed with mismanagement and corrupt governance, the Washington Consensus managed to undermine a T +44 (020) 7401 5350 F +44 (020) 7401 5351 dozen economies in a decade. Countries like Argentina and Indonesia E [email protected] found that the speed and greed of modern finance was a pipeline for every sort of instability.

Director Mark Leonard The two countries that most pointedly ignored pressure from development giants such as the International Monetary Fund and World Patron Rt Hon Tony Blair MP Bank to obey the Washington Consensus now have records that speak for themselves: China and India. Though fraught with contradictions and President Rt Hon Robin Cook MP riddled with problems, China's model is now seducing leaders in countries as different as Brazil (which is sending study teams to Beijing) and Vietnam (now probing the philosophy of Jiang Zemin, the former Advisory Council Chinese president, for business tips). As Ramgopal Agarwala, an Indian Sir Michael Butler sociologist, observed, "China's experiment should be the most admired Professor Fred Halliday Baroness Kennedy QC in human history. China has its own path." Lord Levy Adam Lury John Lloyd I have labelled that path the "", a development Lord Paul Baroness Ramsay approach driven not by a desire to make bankers happy, but by the more fundamental urge for equitable, high-quality growth - because no other formula can keep China from exploding. Tactically speaking, the

Beijing Consensus demands that ideas such as privatisation and free trade be approached with incredible caution. It is defined by a ruthless willingness to innovate and experiment (see China's special economic zones); a lively defence of national borders and interests (see

Taiwan); and by the increasingly thoughtful accumulation of tools of asymmetric power (see the Dollars 400bn of US currency reserves). The goal: growing while holding on to independence. Though much of the thinking reflected in the Beijing Consensus was under discussion in

Chinese think tanks and government centres after the Asian crisis of the late 1990s, it has manifested itself in policy and doctrine only in the past

12 months.

The Foreign Policy Centre

The European Thinktank with a Global Outlook

The idea underpins what Wen Jiabao, China's prime minister, has been saying on his current European trip. Mr Wen's catchphrase is "co- ordinated development", a focus not simply on gross domestic product growth, the sine qua non of Washington Consensus success, but also on growth that is both environmentally friendly and corruption-free. At the recent National Party Congress, Mr Wen hammered home the need to make the party an instrument of quality growth.

Deng Xiaoping's charming defence of capitalism - "It doesn't matter if it's a black cat or a white cat, as long as it catches mice" - is history. China now wants a cat that is green; a cat that is transparent. When Ma Elizabeth House Mezzanine Floor Kai, the conservative development minister, spoke recently to a small 39 York Road gathering in Beijing, he strained with unusual emotion as he talked of London SE1 7NQ the urgency of "transforming" China's growth model into something more sustainable, open and equitable. When Jiang Zemin famously used T +44 (020) 7401 5350 F +44 (020) 7401 5351 the word "new" 90 times in his farewell speech 18 months ago, he was E [email protected] pointing at the only thing that can possibly keep China's experiment from ending in tragic failure: innovation and more innovation.

Director The goal of all of this is to allow China to experience what Mr Wen has Mark Leonard called a "peaceful rise". The Beijing Consensus is a tool of this rise. Patron Rt Hon Tony Blair MP China has a great deal of work ahead to make this project succeed. It must resolve the contradictions of reform, reshape its political culture President Rt Hon Robin Cook MP and transform the way the world regards the country.

China's peaceful rise strategy is not intended as a challenge to the US. Advisory Council But what Mr Wen brings to Europe this week is not simply the energy of Sir Michael Butler a booming Chinese economy; it is the power of a model for global Professor Fred Halliday Baroness Kennedy QC development that is attracting adherents at almost the same speed the Lord Levy US model is repelling them. Washington seems barely aware such a Adam Lury John Lloyd power shift is under way. It spends too much time evaluating Beijing on Lord Paul Baroness Ramsay old-style metrics of GDP or how many aircraft carriers it has. As other nations are drawn into China's orbit by its economic power and the appeal of Beijing Consensus development, you can probably guess which way most of the world may lean.

The writer, former foreign editor of Time magazine, now lives and works largely in China; his paper, The Beijing Consensus, is published this week by the Foreign Policy Centre in London